Nissan confirms robust profit growth

TOKYO -- Nissan Motor Co, Japan's third-largest automaker, reported on Wednesday a 51 percent surge in operating profit last business year, extending its dramatic revival on the back of sturdy sales in overseas markets.

Mirroring preliminary figures announced a month ago, group operating profit at Nissan, owned 44.4 percent by France's Renault, came to 737.23 billion yen ($6.32 billion) in the year that ended on March 31, with net profit growing 33 percent to 495.17 billion yen on sales of 6.829 trillion yen.

Many other Japanese carmakers have also reported record results for last year, driven by sales gains in the crucial U.S. market, cost cuts and a stronger euro.

But analysts expect a tougher environment for Japanese automakers this year as the weak dollar, dragged down by a slippery U.S. economy, threatens to bite into profits.

And with Washington appearing to shrug off a sliding dollar -- now trading in the mid-116 yen level -- many investors are bracing for a continued drop and are growing increasingly leery about exporters' profit forecasts.

Nissan is particularly vulnerable since it is assuming an average dollar exchange rate of 120 yen this year, compared with 115 assumed by Toyota Motor Corp. and Mazda Motor Corp., and 116 by Honda Motor Co.

"We still think 120 yen to the dollar is a reasonable assumption," Toru Yokoyama, general manager of Nissan's finance department, told a news conference.

The damaging fall in the dollar will be offset to some extent by a rise in the euro. But with exposure to North America so much greater than that to Europe, Nissan would have to make up for the currency loss with a bigger expansion in the United States.

Nissan said every one yen fall in the dollar would slash 10 billion yen from annual operating profit, while a one yen fall in the euro would subtract 1.5 to 2.0 billion yen.

"That means that using a dollar exchange rate of 115 yen, you would have to subtract 50 billion yen from the operating profit forecast," Mitsubishi Securities analyst Shigeharu Kimishima said.

"One thing to remember, though, is that Nissan tends to be super-conservative with its forecasts, so it doesn't necessarily mean they would have to revise their projections, unless they undershoot their volume targets."

Nissan's own unit sales forecasts are upbeat.

It expects global sales to grow 9.7 percent to 3.04 million vehicles, with a 17 percent jump in the United States helped by the launch of six new models, including high-margin models like the Murano sport utility vehicle, the Quest minivan and Infiniti FX45 luxury crossover.

But the prospects are not promising.

In the first four months of 2003, Nissan's U.S. sales are down 5.4 percent from the year-earlier period, underperforming the overall market.

And with the company pledging not to sacrifice profits for the sake of volume, Nissan may continue to face problems as its local rivals step up their sales incentives.